China's premier orders boost to pork supplies

By JOE McDONALD | July 12, 2011 | 1:14 AM EDT

A woman looks into her purse for cash to pay for pork she bought at a market in Beijing Tuesday, July 12, 2011. China's premier has ordered local leaders to boost pork production to help cool inflation that pushed up the price of the country's staple meat by 57 percent in June. (AP Photo/Alexander F. Yuan)

BEIJING (AP) — China's premier has ordered local leaders to boost pork production to help cool inflation that pushed up the price of the country's staple meat by 57 percent in June.

During a weekend visit to farm villages, Premier Wen Jiabao called for steps to cut production costs for pork, according to a statement Tuesday on the Cabinet website.

A 14.4 percent jump in June food costs pushed inflation to a three-year high of 6.4 percent in June, well above the government's 4 percent target.

"Pork consumption is a firmly fixed consumer necessity of the masses. A stable pork market is the government's unavoidable responsibility," Wen told farmers at a village in Shaanxi province, according to the statement.

Inflation is politically dangerous for the ruling communists because it undermines economic gains that underpin the party's claim to power. They have declared containing prices their priority but inflation has risen steadily despite five interest rate hikes since October and other curbs.

Tuesday's statement gave no details of measures to cool pork prices but said farmers who met with Wen cited high costs for corn used as pig feed.

"The things pigs eat now cost more than what people eat," a farmer named Li Nahou was quoted as saying.

Analysts blame the inflation spike on rising demand that is outstripping food supplies and a flood of bank lending that was part of China's stimulus after the 2008 global crisis.

Prices of pork, vegetables and fruit also have been driven up by summer flooding that wrecked crops in China's south and east.

Pork prices are unusually volatile because some farmers stopped raising pigs after a 2007 outbreak of blue ear disease killed hundreds of thousands of animals and prompted Beijing to destroy millions more.

The government has ordered food processors and other consumer goods makers to hold down price rises.

Analysts expect inflation to ease later in the year but say only higher production, not rate hikes or other controls, will cause food costs to moderate.

"Macroeconomic policy changes to dampen demand are both inappropriate and futile," said Carl Weinberg of High Frequency Economics in a report Tuesday.